Correlation Between IShares IBonds and IShares ESG

Can any of the company-specific risk be diversified away by investing in both IShares IBonds and IShares ESG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares IBonds and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares iBonds Dec and iShares ESG MSCI, you can compare the effects of market volatilities on IShares IBonds and IShares ESG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares IBonds with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBonds and IShares ESG.

Diversification Opportunities for IShares IBonds and IShares ESG

0.42

Correlation Coefficient

IShares IBonds  IShares ESG

Very weak diversification

The 3 months correlation between IShares and IShares is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds Dec and iShares ESG MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG MSCI and IShares IBonds is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares iBonds Dec are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG MSCI has no effect on the direction of IShares IBonds i.e., IShares IBonds and IShares ESG go up and down completely randomly.

Pair Corralation between IShares IBonds and IShares ESG

Given the investment horizon of 90 days IShares IBonds is expected to generate 2.38 times less return on investment than IShares ESG. But when comparing it to its historical volatility, iShares iBonds Dec is 17.27 times less risky than IShares ESG. It trades about 0.44 of its potential returns per unit of risk. iShares ESG MSCI is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,791  in iShares ESG MSCI on December 20, 2024 and sell it today you would earn a total of  63.00  from holding iShares ESG MSCI or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

iShares iBonds Dec  vs.  iShares ESG MSCI

iShares iBonds Dec

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares IBonds is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares ESG MSCI

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, IShares ESG is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares IBonds and IShares ESG

The main advantage of trading using opposite IShares IBonds and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBonds position performs unexpectedly, IShares ESG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares ESG will offset losses from the drop in IShares ESG's long position.

The idea behind iShares iBonds Dec and iShares ESG MSCI pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.